Thank You

Error.

Ben finally got it. With the world soaking in the swamp of recession and our own economy barely limping along and the dreaded fiscal cliff an increasing threat for the coming year, the chairman awoke to the necessity of doing something radically different from the usual give-the-money-and-run. He festooned his latest package of monetary easing with the vow to keep it in place as long as it takes to breathe some sustainable life into the moribund job market.

The global backdrop couldn't have been more foreboding. Restive mobs rioted in half a dozen Middle Eastern nations, Egypt and Tunisia among them (who needs enemies with friends like this?), inflamed by reports of an anti-Muslim film supposedly made in the U.S. by an expatriate Egyptian whose rap sheet includes financial fraud. Our embassies have come under attack in several countries, including Libya, where our ambassador and three other Americans were murdered by the raging, blood-thirsty throngs.

As news of the rampant gangs in the politically fragile region spread, oil prices shot up to $100 a barrel, a rise that—if it persists, much less goes higher—is destined to cause a further increase in prices across the board. It's impossible to say how much such considerations contributed to the Fed's decision to make QE3 open-ended until some tangible evidence emerges of a strengthening economy and improvement in the jobs picture, except that they doubtless did their bit, as obviously did last month's feeble employment report and the rather dismal recent trend of new claims for unemployment insurance.

Besides purchasing $40 billion a month of agency mortgage-backed securities, the Fed will extend Operation Twist for the rest of this year, so that all told it'll be buying $85 billion or so of long-term securities a month. It also extended its projected stretch of low interest rates until the middle of 2015. The immediate target of the effort, of course, is to add fuel to the tentatively rebounding housing sector, which presumably would juice up the overall economy and the Great Jobs Machine.

There were other likely prods as well. The rising cost of food, for one. The decline in business demand for capital goods, for another. A softening in two of the pillars of the recovery—exports and manufacturing, feeling the squeeze from global recession and somewhat listless domestic demand (autos are a happy exception).

After grimly noting that barely half the eight million jobs that vanished during the great recession have been retrieved by the recovery, Ben vowed to keep adding assets to the Fed's balance sheet and keep its policy tools at the ready until there's "substantial improvement in the outlook for the labor market."

A cheerier note is sounded by Ed Hyman's latest ISI report on the economy, giving due credit to the rally in stock prices, accelerated by the Fed's surprise move, and the uptick in housing prices. The result, by Ed's reckoning, is that consumer net worth is on track this quarter to surge nearly $2 trillion, a far-from-shabby 14% annual rate rise over the previous quarter and 26% above its recession low. Which, Ed figures, logically should help consumer spending and housing.

Whether or not this open-ended easing will do the job is itself an open-ended question. Frankly we've always thought quantitative easing is an awfully circuitous way of trying to rev up an economy. And inflation may be at the moment a distant menace, but it's hardly a nonexistent one.

That said, at least Ben deserves a cheer or even two for trying something new instead of the same old same old. Perhaps the biggest thing the Fed's new approach has going for it is that a sizeable number of Wall Street's most celebrated strategists have given it a thumbs down. Rumor has it that some of these critics may even have pondered the new easing wrinkle for more than two seconds.

THE REAL TRICK AFTER BEN fired his bazooka was to find a stock that didn't take off. No surprise, of course, that the usual favorites—
Appleaapl -1.5351744876157316%Apple Inc.U.S.: NasdaqUSD124.43
-1.94-1.5351744876157316%
/Date(1427835600323-0500)/
Volume (Delayed 15m)
:
40410221AFTER HOURSUSD124.53
0.09999999999999430.08036647110825364%
Volume (Delayed 15m)
:
1623182
P/E Ratio
16.657295850066934Market Cap
736073426681.742
Dividend Yield
1.5108896568351684% Rev. per Employee
2153110More quote details and news »aaplinYour ValueYour ChangeShort position
(ticker: AAPL) and its like—went (we feel the need to stick with a fruitful metaphor) bananas. But so did a mass of lesser lights that for one day, anyway, shone brightly. And so, too, for quite different reasons, did gold, whose spot price shot up some 2% on Thursday, topping $1,760, the highest level since the end of February.

Anything that goosed the stock market with such ferocity, chances are, will also lift the mining stocks, which have been lagging behind bullion. But the rise in the shares of producers of the yellow metal, like that of the precious metal itself, was, in a sense, the sober side of the smiley faces occasioned by the coming of QE3.

Specifically, it fanned fears that always make gold bugs twitchy of a flare-up of inflation and fresh debasement of the currency (the dollar dutifully weakened), which re-burnished the investment attraction of gold as a safe haven. Moreover, with exquisitely bad timing, more than one market technician's enthusiasm for the metal had diminished of late, so the shock of misplaced negative sentiment helped propel the stocks as well.

In any event, gold futures tacked on as much as $37-$38 an ounce during Thursday's wildly exuberant session. One practitioner of the dark art of technical analysis, Alan Newman, proprietor of CrossCurrents, must be tickled pink (or perhaps some shade of yellow is more appropriate): He has been a raging bull on the metal for a dozen years now, and still is.

In his latest commentary, dated Sept. 10, Alan took up the cudgels for gold again, pointing out that the Dow/Gold ratio approximated 7.9 to 1, and he "strongly believes it is headed to an eventual date with destiny at 5-1," which would put the price at something over $2,500 an ounce. But let's not be hoggish: Next year he espies a new peak above the $1,913 set in 2011 and new highs for gold shares as well.

Goldcorp has had its disappointments this year, notably on the extraction end of its holdings, that have plagued the shares. But results seem poised to rebound next year with earnings approaching $3 a share in U.S. dollars and cash flow of around $4.50.

As for Keegan, woes at a Ghana project creamed the stock from its 12-month high of $9.53 to around $4 last we looked. Earnings are conspicuous by their absence, but losses are supposed to be sharply lower the next couple of years, and the company has something like $188 million of cash on its balance sheet.

FRANK GRETZ IS A SEASONED viewer of the stock market who labors for Wellington Shields and puts out a weekly commentary suitably entitled "Equities Perspective." We thought he summed up neatly the market's response to what has been a notable couple of weeks that included the Fed's action, unveiling of the Draghi plan, the German court decision that bucked up the euro, and the new iPhone launch. All of which helped keep the uptrend in equity prices very much intact.

That the market didn't perversely decide to go down on the good news, or even do nothing, he attributes to investors' low expectations, a reluctance to get on board. It's not, Frank says, the "wall of worry" that the market has been climbing, but rather a wall of indifference.

The real point here, he goes on, is that "the market took the good news and went with it. It wasn't priced in, despite the run we've already seen." And that, he feels, is characteristic of good markets, which tend to respond to favorable events and often ignore the bad. When that pattern changes, Frank advises, it's time to start worrying.

We might interject that in this market, when huge quantities of stock trade in a fraction of a second, a prerequisite for staying solvent is to stay alert and be prepared to worry early rather than late, which, alas, has a habit of turning out to be too late.